Corporate Governance: The Fear Of Risk Management

Good Essays
Corporate Governance is a term that broadly defines a business organization laws, rules, or process by which the company operates. Majority of business companies has been under the belief that organizations are to excel in profits. According to Bethel (2012),” Many of the obligations to stakeholder interest have been institutionalized in legislation that provides incentives for responsible conduct.” It was stated, that General Motors, and Chrysler failed to understand customer needs, employee reactions to downsizing, and government regulatory issues. As an end result the companies to meet the goals set by shareholders.
Today, vast organizations are transitioning more towards what is known as balance stakeholder models that in long term
…show more content…
Many business organizations usually have a group of qualified management team in place to address any risk issues that may arise. There are a few ways to consider how posing a risk can either have a positive, negative outcome for the company. According to McGraw-Hill (2012),” First, risk can be categorized as a hazard. Risk management is focused on minimizing negative situations, such as fraud, injury, or financial loss. Second, risk maybe considered an uncertainty that needs to be hedge through quantitative plan and models. Third, risk also creates the opportunity for innovation and entrepreneurship.” In my opinion, there are two ways that Culture can influence corporate risk-taking are by the type of managerial approach and the effects it may have on our country institutions. Therefore, I believe depending on a business corporation size and conditioning of management discretion can overall have a vast impact on society. In conclusion, it was stated that “Greater earnings discretion strengthens and large size organizations weakens the association of culture along with corporate …show more content…
After doing extended research on AIG and Merrill Lynch, in 2008-2009 both companies merge together after facings a financial crisis that could have led to bankruptcy. Instead the company requested for assistance from the government and received a bell out in the amount of $180 billion. Shortly after AIG, executives were faced with criticism when society learned of the corporation receiving $165 million and dispersing it among four executive staff for bonuses. In my opinion, if AIG executives could have held out on accepting the bonus money and instead applying it towards their financial crisis then quite possibly the company could have avoided the scrutiny from society and the government. There are several factors that played a role in AIG; leadership, organizational services, and performance level. In conclusion, I feel that any bonuses a company may receive regardless of their position should be evaluated on their performance level or demonstration of Stewardship in the

Related Documents

  • Decent Essays

    Preventing strained relationships on the board and in management is very important to companies in the banking system. According to Corporate Compliance Insights, “Prior to the financial crisis, several failed banks such as Lehman Brothers and Bear Stearns employed unified Chairman and CEOs, a fact which has led to criticism of the unified role” (Sikes, Corporate Compliance Insights). Presently, only two banks, Citigroup and Bank of America continue to separate the roles while banks such as JP Morgan vote to stay unified to increase profits. Overall, the world leans towards separation because of fraud that is created in a unified…

    • 789 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    There is a whole host of instances where CEOs have embezzled large sums of money from their companies for their own financial benefit. One example of this is the 2005 conviction of the former CEO of Tyco International, Dennis Kozlowski, and his “racketeering charges related to $600 million in stock fraud” (Martin and Butler 2017). In this case the agency theory was unsuccessful, but in most cases the incentives offered to CEOs avoid such…

    • 863 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    iii. Factors influence Corporate Social Responsiveness In business world, managers have to deal with a range of unstable and ever-changing issues, as well as the same complex stakeholder groups that have different interests (McMahon, 1999). Davis and Blomstrom’s “Iron Law of Responsibility” mention that corporate social responsibility must commensurate with their social power (Salbu, 1993). Any avoidance of social responsibility will lead to the loss of power given by the society. Welcomer, Cochran, Rands, & Haggerty (2003) indicate that stakeholder power and corporate social responsiveness have positive relationship.…

    • 1119 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    Our society is based on supply and demand, production and profit. There is a lot of responsibility that comes with being a corporation, you become the center of our world in a sense. Due to Carroll’s theory, corporations may be assessed and improved based on the model of social responsibility. Therefore, one may conclude that Carroll effectively developed the theory of corporate social responsibility in order to regulate large corporations, and ensure they are working for the benefit of society as a whole. Carroll’s theories of social responsibility are especially beneficial for managers because it allows for an effective method for assessing any social issues that may occur and improving the way in which business is conducted by exposing areas that can be…

    • 739 Words
    • 3 Pages
    Decent Essays
  • Decent Essays

    To what will foreign shareholders lead our economy? Back in 1989 Harvard Business School professor Michael Jensen in his article "The Eclipse of the Public Corporation" has announced that public companies with a large number of shareholders, which were created in the West throughout the twentieth century, nowadays impede the further development of the economy in many sectors. The reason is simple: the shareholders' interests do not coincide with those of managers. For the first ones it is profitable to "pull" means out from a company, relying on short-term investments. And this policy affects the interest of those who are counting on a longer-term perspective - workers, managers, partners, customers, and even the people of those regions, where…

    • 1961 Words
    • 8 Pages
    Decent Essays
  • Decent Essays

    The Welch Way Analysis

    • 1270 Words
    • 6 Pages

    For example, when assessing the decision to make layoffs within a corporation, often the honorability of the layoffs are questioned. Layoffs are morally in question because layoffs are often made to increase profitability of a business at the risk of employee’s livelihoods. Ethical soundness is often situational, so deciding if a layoff is right or wrong is not always black and white. This is why teleological and deontological decision making theories can be of use to managers or corporate leaders. Moral theorists argue that ethical judgements are functions of age and experience.…

    • 1270 Words
    • 6 Pages
    Decent Essays
  • Decent Essays

    Key Term Business Risk

    • 716 Words
    • 3 Pages

    Key Term and Why are You Interested in it I choose the key term business risk because I am interested in the causes of business failures and possible ways to prevent it. Business risk influences are the negative impacts of sales, costs, competition, or economic conditions. Supply and demand factors could also result in the failure of a business. The three types of business risk are ownership risk, operation risk, and transfer risk (Satterlee, 2014). In an effort to protect and prevent business failure, business professionals must be aware and prepared for the threat of anything that could cause damage to the company’s profits or reputation.…

    • 716 Words
    • 3 Pages
    Decent Essays
  • Decent Essays

    Financial statements are formal reports of the financial positions that businesses are in. It mostly runs red or black. Most managers and business owners use these reports to monitor, their business and see how well they are competing with other businesses. Owning a business is very challenging, it is important for the company to be stable, organized, and for them to be making profit. To do this they use…

    • 750 Words
    • 3 Pages
    Decent Essays
  • Decent Essays

    Many benefits come from conducting a threat and risk assessment, especially in larger businesses where decisions are not made by a sole proprietor but instead by a group or board of individuals. Cost justification is a prime example of how a business can benefit from an assessment, added security usually encompasses additional expenditure. Since this does not generate easily identifiable income, justifying the cost is often challenging. An effective risk assessment process should educate key business managers on the most critical risks associated with conducting business and automatically and directly provide justification for security investments. Productivity is another great benefit of risk assessments.…

    • 794 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Through the analysis of the gains of many outsourcing companies, there are many non-core activities undertaken by these companies that promise to their customers reducing costs and focus on their business activities that create direct value [1]. Much research has been done on how companies choose which activities to do internally or externally. There is a lot of repetition of simple cost / benefit arguments that are difficult to measure. What is the long-term cost of letting the company managers themselves learn from making a strategic plan rather than hiring a specialized, referenced consulting firm on the subject? What is the benefit of using Outsourcing in 80% of our non-core activity?…

    • 4397 Words
    • 18 Pages
    Decent Essays